As airports in China and south-east Asia up their game, and airlines develop more and more direct intercontinental services to and from the region, and does Singapore still have the competitive advantage that is used to? Phil Nasskau asks Albert Lim Tiong Huat, vice president for cargo and logistics development at Changi Airport Group, what the future holds for Singapore Changi, long southeast Asia’s pre-eminent cargo airport and a key hub for the region.
Q: How have you marketed this cargo hub to airlines, given that you have lots of competition, for example with Hong Kong on the doorstep and KL as an up-and-coming cargo hub nearby?
A: For one thing, the Asian growth story is not a zero-sum game, and the faster air freight growth in north Asia and Hong Kong will have positive spinoff for the rest of Asia and southeast Asia, including Singapore and Malaysia. This is especially so in view of the rise of intra-Asia trade, and free trade agreements, as well as the fast-growing middle class, which are important drivers for long-term air cargo growth. The new ASEAN-China and ASEAN-India free-trade agreements (FTAs), which came into effect in 2009, are also expected to accelerate trade growth within ASEAN. The ASEAN FTAs with South Korea, Australia and Japan will also bring about opportunities for Singapore and Changi.
For Hong Kong in particular, we serve different catchment areas. For instance, China has recently overtaken the United States as Singapore’s largest air freight market. Hong Kong was Changi’s second largest growth market in 2010. This signifies the positive impact that the growth of north Asian markets have on Singapore’s role as a cargo hub.
Q: To what extent have airlines, cargo handlers and logistics companies helped guide the building projects at Changi? Does the airport operator listen to everyone, or is the master plan the airport’s alone?
The Changi Airfreight Centre (CAC), a 46-hectare free -trade zone, was developed back in 1981, when Changi Airport first came into operation. Many developments have taken place in CAC over the last 30 years, and were largely driven by market growth and changing industry needs. For instance, the development of Changi Megaplex (a multi-tenanted warehouse facility) in the 1990s was made following extensive consultation with the freight forwarding community, and to cater for the rapidly changing needs of the forwarding industry. More recently, the development of TNT’s Singapore Regional Hub in 2009 and the establishment of SATS’ Coolport@Changi in 2010 are examples of how Changi Airport caters to the growth aspirations of our clients and the ever-changing needs of the industry.
The launch of the Airport Logistics Park of Singapore (ALPS) in 2003 is another excellent example of how Changi Airport has adapted to changing industry trends. ALPS is a 26-hectare logistics park located next to the current CAC. Strategically located within the airport’s free trade zone, ALPS enables quick turnaround and value-added logistics and regional distribution activities, and leverages on the connectivity and handling efficiency of Changi Airport. Some of the value-added logistics activities available at ALPS includes postponement, configuration, sub-assembly, returns and repairs and vendor-managed inventory etc., for time-sensitive products. This means that third-party logistics service providers can undertake rapid, value-adding replenishment and fulfillment activities for the entire region with greater efficiency, since time and manpower relating to transport and documentation will be reduced. These factors have also attracted many global companies to establish regional distribution centres (RDCs) in ALPS, to serve their growing Asia-Pacific clientele from Singapore. Changi Airport Group actively engages our cargo partners, identifying new market opportunities for future growth.
- How scalable is this hub? Is there more land for more development, or is it finite?
We are always open to explore projects that would grow Changi’s cargo hub status. While land around the airport for a small city state like Singapore would be tight, CAG takes a proactive approach in our airport master planning process to take into consideration long-term needs. An example would be the development of the Air Cargo Express (ACE) Hub that supports FedEx’s Singapore Regional Hub. This project required CAG to acquire approximately 8 hectares of land from the state. It underlined CAG’s commitment to go beyond our existing airport boundaries to facilitate the growth of our partners at Changi Airport.
Q: How does Changi work with its tenants – airlines and handlers and other logistics companies, in terms of ownership of land, buildings and equipment?
A: In the case of warehousing and office facilities developed within the CAC, CAG would play the role of landlord to more than 200 freight forwarders located within the airport free-trade zone. However, there are instances where CAG is the land owner and leases the land to an end user, who would develop its facility on the land. An example would be the Air Cargo Express (ACE) Hub project, where FedEx leases the land from CAG for its Singapore Regional Hub.
CAG does not own the equipment used for cargo handling. They belong to the airlines, handlers and cargo agent, as we are not involved in the actual handling of cargo.
Q: How does the airport company manage the environmental aspects of these building projects, and what about community relations – for example the problem of noise and dust from construction? And has the airport company taken the opportunity to invest in “green” initiatives as a consequence of this development (ie alternative power)?
A: Changi Airport pursues environment initiatives to ensure the sustainable growth of the airport and fulfill our corporate social responsibility to the local community. Our sustainability efforts have been well recognised by the local and international community. Terminal 3 was awarded the Green Mark Gold in October 2009. The Green Mark scheme is a national green building rating system to evaluate a building for its environmental impact and performance.
As a company, CAG has a clear environmental policy, with environmental efforts focused on five major areas: emissions, energy efficiency, waste management, noise management and water management. Some key initiatives at the airport include: facilitating the introduction of CNG tractors to be used by the ground handlers; using energy-efficient lighting, and installation of motion sensors at the airport; promoting recycling and use of recycled materials for construction; rainwater harvesting and the use of water efficiency tools.
Meanwhile, CAG has also supported SATS in its development of its solar-powered mobile chillers. These are temperature-controlled infrastructure installed at the airport’s tarmac to keep perishables at the right temperature while in transit at Changi. For its green efforts, CAG has been awarded the Best Green Service Provider – Airport at the Annual Asian Freight and Supply Chain Awards in 2010 and 2011. The attainment of such awards is a testimony to our ongoing sustainability initiatives.
- What is the prediction for freight flows at Singapore and how do you see the development of the freight hub over the next 20 years?
Changi Airport handled 1.81 million tonnes of air freight movements in 2010, growing 11% year-on-year. The recovery was driven strongly by growth in import and export flows. In 2011, we have seen additional freighter capacity being put into routes across southeast Asia and India, as well as our catchment market of Australia. The impact of these capacity injections could be seen by the strong growth in Changi’s transhipment volume growth for March (7%) and April (16%) this year.
Changi has also performed well for the first five months of 2011, growing by 3% year-on-year. Going by our air freight performance in 2011 so far, we expect our cargo volumes to recover back to pre-crisis levels this year. On average, air cargo generally grows at a rate which is about half that of the gross domestic product (GDP) growth. With Singapore’s long term GDP growth projection at about 4-6% per year at a steady state, we are expecting our long term air freight growth in the range of about 2-3% per year, on average.
Notwithstanding, global trade volumes are still susceptible to economic recovery in the key cargo markets in the US and Europe, as well as the impact of rising fuel prices, which could have an impact on global trade and consumption. However, we have good reasons to believe that Changi Airport will continue to play a key role as a cargo hub in the region.
Singapore and Changi are competing from a position of strength as a leading global logistics hub and international cargo airport. Changi Airport is one of Singapore’s critical success factors as a leading global logistics hub in Asia. The World Bank Logistics Performance Index (LPI) 2010 study, ranking 155 countries on logistics performance, placed Singapore top in Asia and second globally after Germany. Singapore has consistently ranked well in key parameters such as efficiency of cargo clearance, quality of trade and transport infrastructure, timeliness of international shipments and competence of logistics service providers.
We are also well located in southeast Asia to take advantage of the growth in intra-Asia trade, as well as the growing trade between Asia and emerging markets like India and Africa. Procurement Asia predicted that intra-Asia trade is set to grow at an annual rate of 12% until 2020. Free-trade agreements, as well as the fast growing middle class, which are important drivers for long-term air cargo expansion, will further contribute to Changi’s growth.
Lastly, we cannot forget the important role that our industry partners play in the future success of the hub. The vibrant community of third-party logistics service providers (3PLs), and integrated express companies, with significant regional headquarter functions and logistics operations here in Singapore, will continue to be multipliers that help attract regional distribution centres (RDC) from major shippers across various industries.
We are confident that the above factors will continue to make Singapore a compelling global aviation and logistics hub to serve our immediate region and beyond.